“Prices have increased by at least 25 percent over the past six months, as stronger Chinese currency compared to US Dollar is driving up import prices,” Rajesh Kaji Shrestha, president of Nepal China Chamber of Commerce and Industry, told Republica on Sunday.[break]
“Traders have already started bringing down import the northern neighbor.”
Weakening greenback vis-à-vis Yuan is one of the reasons behind Nepal’s trade deficit with China that has been ballooning over the past few years.
Nepal’s trade deficit with China is growing due to limited Nepali exports amid rising inflow of Chinese goods.
According to Trade and Export Promotion Center, trade deficit with China shot up to Rs 38.2 billion during fiscal year 2009/10 from Rs 11 billion recorded in 2005/06.
Nominal exports coupled with rising imports from China at higher price is the key factor behind rising trade deficit with the northern neighbor.
“Traders are not only scaling down import volume, they are reluctant to place fresh order due to soaring prices amid weakening purchasing power of consumers,” Shrestha added.
A US dollar was valued 8.27 Yuan in 2005, 8.06 in 2006, 7.77 in 2007 and 7.1 in 2008. Similarly, a US dollar was worth 6.83 Yuan in 2009 and 6.82 in 2010. Economists expect the Yuan to strengthen further (a US dollar = 6.3 Yuan) in November, 2011.
As increasing prices is spurring cross-border smuggling, traders say the government has to bring down customs duty of Chinese goods to check prices in the domestic market.
Pashupati Shrestha, member of Nepal Trans-Himalaya Trade Association, also said stronger Chinese currency and increasing influence of Indian traders in Guangzhou - the main trading hub in China - has weakened the bargaining power of Nepali traders, raising import costs in recent times.
“Chinese traders are no longer interested to deal with Nepali importers, who place orders in small quantity, as they are getting big order from Indian traders. This means Nepali traders are compelled to pay higher prices as compared to the Indian traders,” said Shrestha, who has been importing mobile sets from China.
Nepal imported goods worth Rs 39.21 billion from China during the fiscal year 2009/10, up from Rs 32.21 billion recorded in 2008/09. Nepal mainly imports consumer electronics, garment, machineries, decorating goods, wooden furniture, vegetables and fruits, bags, suitcases, laminated goods, yarn, textile, steel bars, office machines and vehicles from China.
Related story
RSP Acting Chair Aryal calls for probe into GenZ movement viole...
